EXHIBIT 99.1
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
GRANADA INVESTMENTS, INC. :
:
Plaintiff, : Case No.: 1:89CV0641
:
V. :
:
TRIARC COMPANIES, INC. :
f.k.a. DWG Corporation, et al., :
:
Defendants. :
:
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DWG CORPORATION, :
:
Plaintiff, : Case No.: 1:92CV1164
:
V. :
:
VICTOR POSNER, et al., :
:
Defendants. :
:
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DWG CORPORATION, et al., :
:
Plaintiff, : Case No.: 1:92CV1206
:
V. :
:
GRANADA INVESTMENTS, INC., :
:
Defendants. :
:
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DONALD J. GLAZER, :
:
Plaintiff, : Case No.: 1:94CV1294
:
V. :
:
DWG CORPORATION, :
:
Defendant. :
:
: ORDER AND
FINAL JUDGMENT
THOMAS D. LAMBROS, CHIEF JUDGE
The purpose of this order is to resolve all outstanding matters in
these actions. The following motions are at issue: 1) Motion of Plaintiff
Granada Investments, Inc. for an award of costs pursuant to the February 12,
1991 Stipulation of Settlement; 2) the Joint Motion of Defendant Triarc
Companies, Inc., and Intervening Plaintiff the Official Committee of
Unsecured Creditors of NVF Company Regarding Proceedings in United States
District Court for the District of Delaware, Case No. 94-400, The Official
Committee of Unsecured Creditors of NVF Company v. Posner, et al.; 3) Motion
of Defendants Brenda Castellano, Melvin R. Colvin, Marco Loffredo, Bernard I.
Posner and Martin J. Posner (hereinafter the Posner directors) for an order
to require Bankers Trust Company and counsel for the Official Committee of
Unsecured Creditors of NVF Company to appear and show cause why they should
not be held in contempt of court; and 4) Motion of the Posner directors for
declaratory judgment concerning the scope and operation of the consent decree
entered in this action February 12, 1991, as modified on April 26, 1993.
Triarc Companies, Inc., is the successor by merger to DWG Corporation,
an entity that for years was dominated by Victor Posner. The original claims
advanced by Granada Investments, Inc., alleged that Victor Posner had
operated DWG for his personal benefit by using the company as means to enrich
himself and members of his close circle of associates and family. The
original claims against Victor Posner and the various DWG board members named
in the Complaint were resolved through a consent decree that mandated a
democratic process of corporate governance within the company. Previous
orders issued in this action describe in considerable detail the specific
mechanisms developed to facilitate immediate judicial intervention, if
necessary, to enforce compliance with the injunctive provisions of the
original settlement. See, Granada Investments, Inc., v. DWG Corp., 823 F.
Supp. 448 (N.D. Ohio 1993).
A paramount feature of the 1991 consent decree was the establishment of
a control apparatus providing for court appointed "watch-dog" directors to
serve on the DWG board. By reason of claims that Victor Posner had continued
to disregard his fiduciary responsibilities to DWG shareholders, additional
class, derivative, and equitable enforcement proceedings were instituted in
the Northern District of Ohio against Victor Posner and his associates.
These additional claims produced months of intense litigation which subjected
DWG to enormous expense and deprived the company of any real day-to-day
management. In the midst of this precarious state of affairs, entrepreneurs
Nelson Peltz, Peter May, and Leon Kalvaria presented a proposal that offered
potential to restore public confidence in DWG and an alternative to a
receivership. Messrs. Peltz, May and Kalvaria formed DWG Acquisition Group,
L.P. The Acquisition Group purchased a controlling interest in DWG,
endeavored to eliminate and simplify the byzantine organizational maze that
Victor Posner had interwoven with DWG, and caused the infusion of roughly 400
million dollars in capital to modernize the company. The proposed change of
control was, in effect, the remedial equivalent to the relief sought by
Plaintiffs. For this reason and given the extremely favorable market
reaction to the proposed Posner buy out, preliminary approval was given to
the proposed settlement and modification of the February 12, 1991 consent
decree. Notice that a Modification to the consent decree had received
preliminary approval by the undersigned was published in accordance with the
provisions of Fed. R. Civ. P. 23 and 23.1.
A fairness hearing concerning the Modification and underlying
transaction was conducted in Cleveland before the undersigned on March 22,
1993. No objections were advanced. On April 26, 1993, a settlement
confirmation hearing was conducted to verify that the transaction
contemplated by the Modification had been completed. A report was rendered
by the court-designated directors, confirming the occurrence of every
condition required to consummate the removal of Victor Posner from DWG
management.
Following removal of Victor Posner, DWG was renamed Triarc. Later in
1993 by reason of securities fraud, the Honorable Milton J. Pollack, S.D. New
York, barred Victor and Steven Posner from serving as officers or directors
of any public company and ordered them to place in a voting trust all stock
which they own in public companies under their individual or joint control.
See, Securities and Exchange Commission v. Drexel Burnham Lambers, Inc., 837
F. Supp. 587 (S.D.N.Y. 1993).
In 1994 shareholders or creditors of Victor Posner affiliates APL and
NVF commenced actions in other forums that alleged Posner had breached
fiduciary duties to those companies through his management of DWG.
Claims were raised by NVF creditors that not only implicated Posner's
tenure as DWG chairman, but, according to arguments raised by Defendants
here, impinge on the operation of the consent decree in this action. Similar
claims have been raised by creditors of APL, another Posner affiliate.
On May 25, 1994, the Official Committee of Unsecured Creditors of NVF,
(hereinafter NVF) moved under the provisions of Fed. R. Civ. P. 24(b) to
intervene in this action. No objections to intervention were filed by any
party. On July 15, 1994, following correspondence from NVF urging action on
their motion to intervene, intervention was granted.
The claim filed by NVF in support of their motion to intervene alleges
that in July 1991, subsequent to implementation through the consent decree of
the specialized corporate governance procedures applicable to the DWG board
discussed above, Victor Posner caused DWG to approve the conversion of
Chesapeake Financial preferred stock that DWG had received from NVF in return
for debt forgiveness. NVF alleges that this conversion was a scheme by
Victor Posner and DWG to dilute NVF's percentage of ownership in Chesapeake
Financial, the parent of Triarc crown jewels, Arby's and R.C. Cola. The
claim filed by NVF further alleges that the so-called "minority share
disposition transactions" between DWG, on the one hand and (i) Insurance and
Risk Management, Inc. re: CFC Stock; (ii) IRM re: IRM Stock; and (iii) NVF
Company re: CFC Holdings stock also were injurious to NVF. By reason of
these transactions, NVF has alleged that Triarc, Victor Posner and the Posner
directors are liable to NVF for breaches of fiduciary duty and an assortment
of statutory violations including RICO.
In addition to issues raised by Intervenor NVF, issues arose between
Victor Posner and Triarc concerning termination of Triarc's tenancy at the
Victorian Plaza apartments, Triarc claims against Victor Posner and whether
Victor Posner owed Triarc a duty to indemnify it against NVF and APL claims.
On September 13, 1994, the parties, including NVF, were instructed by
Order to examine whether operation of the consent decree here would be
implicated by resolution of NVF claims that arise from Victor Posner - Triarc
transactions. A joint motion was filed by NVF and Triarc on September 27,
1994, to determine whether the September 13, 1994 Order was an injunction
against proceedings in the action brought by NVF in Delaware against Triarc,
Victor Posner and the Posner directors. This Order is intended to make
perfectly clear, that the Order issued September 13, 1994, was not intended
to interfere in any way with the jurisdiction of the District Court in
Delaware. Accordingly, for reasons explained in greater detail below, the
joint motion of Triarc and NVF is granted.
The joint motion of NVF and Triarc came on for hearing on October 27,
1994. Counsel for all parties were in attendance. At the request of counsel
for NVF and Triarc, the hearing on the joint motion was recessed to provide
an opportunity to the parties to resolve their differences. Proceedings on
the joint motion were scheduled to resume on November 15, 1994. On November
15, 1994, counsel for all parties appeared and conducted further argument
concerning the scope and operation of the provisions of the consent decree in
this action in relation to the claims asserted by NVF. Proceedings were
again recessed to permit the parties to seek a resolution without further
litigation.
During the recess in proceedings following the November 15 hearing,
issued related to compliance by the original parties with the terms of the
modified consent decree, claims against Triarc by reason of alleged
agreements made by Victor Posner or his agents prior to the change of
control, collateral litigation by persons other than DWG shareholders
claiming injuries attributable to Victor Posner's management of DWG and its
affiliates prior to the change of control, but allegedly not disclosed at the
time of the April, 1993 Modification, and indemnification of Triarc by Victor
Posner against claims of NVF and APL were resolved on December 1, 1994,
during negotiations in Ft. Lauderdale, Florida. Settlement discussions then
resumed between the original parties and NVF in Cleveland on December 5,
1994. At the December 5, 1994 hearing, counsel for the parties reiterated
their views concerning operation of the Modified Consent Decree.
On December 16, 1994, the Posner directors filed a motion for a
declaratory judgment and to show cause. An expedited hearing on the motion
of the Posner directors was conducted on January 13, 1995. Argument was
presented by counsel. The Posner directors allege that Bankers Trust, a
member of the NVF Creditors Committee, was a DWG shareholder and precluded by
language in the modified consent decree from participation as a plaintiff in
NVF's action in Delaware. Bankers Trust has stated no showing has been made
that it was a direct or beneficial holder of DWG stock. The Posner directors
state that Bankers Trust has violated the specific injunction in the consent
decree against suits by DWG shareholders and should be held in contempt. The
Posner directors have also requested that this court issue a declaration
concerning the rights and obligations of the parties under the modified
consent decree.
It is recognized that Granada, Victor Posner, the Posner directors, and
Triarc have argued that the Modification and Order approving it preclude
NVF's Delaware claims. It is unnecessary for this court to rule on this
issue, however, for the reason the Victor Posner-Triarc settlement protects
the integrity of the Modification and the Delaware Court may ultimately
resolve the preclusion issue. For this reason, the motion for a declaratory
judgment is hereby dismissed without prejudice to the Posner directors right
to renew it following a trial in Delaware.
The original parties to this action are in agreement that the
Modification bars claims against Triarc. However, in the event that there is
a liability determination in Delaware against Victor Posner and Triarc, NVF
should proceed first against Victor Posner to obtain satisfaction. This
court, however, will defer exercising its jurisdiction at this time to
mandate this result, in order to avoid any potential interference with the
jurisdiction of the Delaware Court. Accordingly, the joint motion of Triarc
and NVF is granted and the motion for a declaratory judgment is dismissed
without prejudice, subject to renewal under the terms set forth above.
The motion for an order to show cause is denied on the same grounds and
subject to the same conditions as the motion for declaratory judgment.
All claims asserted in this action by NVF are hereby transferred under
the provisions of 28 U.S.C. Section 1406 to Delaware district court.
Victor Posner and the Posner directors guided DWG and it affiliates
during the periods of concern to NVF. Although it may be argued that the
Modification releases them from liability for actions that occurred prior to
April 1993, where a consent decree "has been turned through changing
circumstances into an instrument of wrong," equitable reformation or judicial
modification of the decree is appropriate. Lorain NAACP v. Lorain Bd. of
Education, 979 F.2d 1141,1148 (6th Cir. 1992).
The Modification in this action was approved to prevent the financial
collapse of DWG and to accomplish the removal of Victor Posner. Substantial
capital has been invested in Triarc. Since the removal of Victor Posner,
Triarc's new management has steered the company toward increased
profitability. Shareholder confidence is solid. It is contrary to the
entire purpose of the Modification to saddle Triarc with liability for
alleged Victor Posner wrongdoing. But for the Modification, Triarc as we
know it would not exist. The only source for an NVF recovery would have been
a claim in bankruptcy or against Victor Posner personally.
Triarc and Victor Posner have entered and agreement that resolves all
outstanding issues between them, including the indemnification of Triarc
against claims by NVF. In the event of a judgment against Triarc and Posner
in Delaware, NVF should proceed against Posner first.
The motion of Granada Investments, Inc. and Squire, Sanders & Dempsey
for an award of costs is hereby granted to the extent set forth below.
Under the settlement between Victor Posner and Triarc, Triarc is to act
as a clearinghouse for payment of expenses of this litigation. Accordingly,
Triarc is to remit on February 7, 1995, by wire transfer, payment to Granada
Investments, Inc. and Squire, Sanders & Dempsey in the amount of $850,000.00,
and on or before March 2, 1995, payment to Donald J. Glazer, in the amount of
$200,000.00. Payment of fees and expenses of the court-designated directors
shall be as determined by the Board of Directors of Triarc Companies, Inc.
Mr. Nelson Peltz, Chairman and Chief Executive Officer of Triarc, has stated
that he will recommend to the Triarc Board that it approve the full amount
requested by the court-designated directors as stated in open court on
February 6, 1995. Triarc is to also reimburse former Special Director Thomas
Prendergast $5,985.81 for his services in connection with resolution of the
Pennsylvania Engineering claims.
The settlement of claims between Victor Posner and Triarc, the
permanent bar imposed by Judge Pollack against Victor Posner, resolution of
the Granada and Glazer claims, and transfer of remaining claims to Delaware
should enable Triarc to focus its exclusive attention on activities to
increase shareholders confidence and value. The modification provides that
its terms will remain in force for a period of four years from April 1993 or
until Victor Posner's interest in Triarc is less than 5%. The effective
period relates to a minimum time frame or stock ownership level necessary to
eliminate Posner's ability to influence Triarc management.
Events have now occurred that were not contemplated when the
Modification was approved. Triarc has moved from the Victorian Plaza.
Victor Posner is permanently barred from service as an officer or director of
any public company. No rent or dividends are paid by Triarc to Posner.
Victor Posner is obligated to completely indemnify Triarc against APL or NVF
claims. Any violation by Victor or Steven Posner or the bar imposed by Judge
Pollack will result in a Securities and Exchange Commission enforcement
action against him. Any involvement in the management of Triarc by Victor or
Steven Posner will violate the officers and directors bar imposed by Judge
Pollack. These developments provide safeguards against Victor Posner
interference in the affairs of Triarc that are equivalent to those provided
by the specialized corporate governance provisions in the modification.
Accordingly, in light of the changed circumstances brought about by the
10b(5) bar and the Triarc-Posner settlement, the effective period under the
consent decree is deemed to have expired and the consent decree is hereby
terminated.
IT IS SO ORDERED.
Thomas D. Lambros
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Thomas D. Lambros
Chief Judge
AT CLEVELAND, OHIO
DATED: February 7, 1995